Calculating Your True Hourly Wage

Recently I decided to calculate my true hourly wage. This is an eye opening activity for anyone who receives a pay check. Once you calculate your true wage, try figuring out what various items cost you in hours worked. When you start realizing that those new jeans cost you 12 hours of pay, you being to rethink the purchase. So now you probably want to know how exactly you calculate your true hourly wage. Basically, you take your annual salary less all work related expenses and divide by the number of hours you work in a year. Be sure to include time for commuting to and from work and for all work related activities during your “off” time. And don’t forget to add in the value of employer provided benefits (401k matching, health insurance, etc). You can see a more detailed explanation over at The Simple Dollar.

Daily hours worked
+ Daily commute time to and from work
= True daily work hours

Days worked per week
* 52 (weeks per year)
– Paid leave days taken
* True daily work hours
= Annual Work Hours

True Annual Salary
/ Annual Work Hours
= True Hourly Wage

Try not to be too sick when you see this number. Now that you know what your true hourly wage is, start figuring out what that item you want really costs you in time. I bet you’ll reconsider a few of those purchases.

For those that are curious, my true hourly wage is almost half of the hourly wage amount that shows up on my paycheck. Sad, isn’t it?

This post is being linked to Frugal Friday over at Life As Mom. Head over there to see all the Frugal Friday links.